Beacon Roofing Supply Reports First Quarter 2018 Results

First quarter EPS of $0.98 ($0.68 Adjusted) vs. $0.33 ($0.56
Adjusted) in the prior year

First quarter net income of $67.6 million ($46.7 million Adjusted)
vs. $20.4 million ($34.4 million Adjusted) in the prior year

First quarter Adjusted EBITDA grew 7.4% to $86.0 million vs. $80.0
million in the prior year

Successfully closed on the acquisition of Allied Building Products
for $2.625 billion on January 2, 2018

February 08, 2018 04:03 PM Eastern Daylight Time

HERNDON, Va.--(EON: Enhanced Online News)--Beacon Roofing Supply, Inc. (Nasdaq:BECN) announced results today for
its first quarter ended December 31, 2017 of the fiscal year ending
September 30, 2018 (“2018” or “Fiscal 2018”).

“Adjusted Net Income
(Loss) and Adjusted EPS”

Paul Isabella, the Company’s President and Chief Executive Officer,
stated: “Fiscal 2018 is off to an excellent start, highlighted by strong
first quarter sales growth. We delivered 8.3% organic sales growth,
boosted by post-hurricane rebuilding efforts in Florida and Texas, and
strong sales results from our acquired businesses. Importantly, overall
product pricing was a positive contributor to first quarter sales
growth. In our existing markets, residential roofing posted its 15th
consecutive quarter of positive growth, with a 9.6% increase.
Complementary products represented our best performing category, with
11.7% organic growth; the result of our focused efforts and a favorable
economic backdrop. Commercial roofing also contributed positively, with
a second straight quarter of mid-single digit existing market growth.
Our first quarter produced record Adjusted EBITDA, driven by strong
sales and excellent operating cost controls. The recently announced tax
reform also provided a meaningful benefit to first quarter results.
Current and future tax savings will be utilized to further improve our
balance sheet, pursue additional growth avenues and invest in our core
business, including our 8,500+ employees. Lastly, on January 2, 2018 we
announced the closing of the Allied acquisition. This adds approximately
$2.6 billion in pro forma revenue, a network of more than 200 branches
and an outstanding workforce to our organization. The Allied integration
process is proceeding very well, and we anticipate a smooth combination
with expected synergies that are consistent with our previously
announced plans. Beacon’s near term and long term outlook is bright, and
we remain committed to delivering strong growth and operating
performance for our shareholders.”

First Quarter

Total sales increased 12.0% to a first quarter record of $1.12 billion
in fiscal 2018, from $1.00 billion in 2017. Residential roofing product
sales increased 11.1%, non-residential roofing product sales increased
5.4% and complementary product sales increased 27.5% over the prior
year. Existing markets sales, excluding acquisitions, increased 8.3% for
the quarter. The first quarter of fiscal years 2018 and 2017 each had 61
business days.

Net income for the first quarter was $67.6 million, compared to $20.4
million in 2017. First quarter EPS was $0.98, compared to $0.33 in 2017.
Adjusted Net Income (Loss), after removing the impact of acquisition
related costs and the net benefit from one-time tax items, was $46.7
million in the first quarter of 2018, compared to $34.4 million in 2017.
First quarter Adjusted EPS was $0.68, compared to $0.56 in 2017. (See
included financial tables for a reconciliation of “Adjusted” financial
measures to the most directly comparable GAAP financial measures). First
quarter results were positively impacted by strong net sales growth,
attractive operating expense leverage and beneficial tax adjustments.
Compared to the prior year, fiscal year 2018 EPS was negatively impacted
by lower gross margins and increased interest expense. Furthermore,
additional shares outstanding from a September 2017 secondary offering
of our common stock had an approximate $0.08 dilutive impact on first
quarter 2018 EPS.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into
law. During the first quarter of fiscal year 2018, there were three
primary impacts from this change: a one-time benefit of $0.68 related to
the revaluation of deferred tax assets and liabilities, one-time costs
of $0.01 tied to the repatriation tax of foreign earnings and profits
and benefits from a lower federal corporate income tax rate. Our
Adjusted EPS disclosures remove the net benefit from the initial two
items. The overall impact of tax reform raised first quarter EPS by
$0.71 and Adjusted EPS by $0.09. For fiscal year 2018, we anticipate our
effective tax rate will be approximately 29-30%.

The Company will host a webcast and conference call today at 5:00 p.m.
ET to discuss these results. The webcast link and call-in details are as
follows:

This release contains information about management's view of the
Company's future expectations, plans and prospects that constitute
forward-looking statements for purposes of the safe harbor provisions
under the Private Securities Litigation Reform Act of 1995. Actual
results may differ materially from those indicated by such
forward-looking statements as a result of various important factors,
including, but not limited to, those set forth in the "Risk Factors"
section of the Company's latest Form 10-K. In addition, the
forward-looking statements included in this press release represent the
Company's views as of the date of this press release and these views
could change. However, while the Company may elect to update these
forward-looking statements at some point, the Company specifically
disclaims any obligation to do so, other than as required by federal
securities laws. These forward-looking statements should not be relied
upon as representing the Company's views as of any date subsequent to
the date of this press release.

About Beacon Roofing Supply

Founded in 1928, Beacon Roofing Supply, Inc. is the largest publicly
traded distributor of residential and commercial roofing materials and
complementary building products, operating 590 branches throughout 50
states in the U.S. and 6 provinces in Canada. To learn more about Beacon
and its family of regional brands, please visit www.becn.com.

BECN-F

BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

Three Months Ended December 31,

20171

% of Net Sales

20162

% of Net Sales

Net sales

$

1,121,979

100.0

%

$

1,002,184

100.0

%

Cost of products sold

852,226

76.0

%

751,117

74.9

%

Gross profit

269,753

24.0

%

251,067

25.1

%

Operating expense

220,657

19.7

%

204,110

20.4

%

Income from operations

49,096

4.3

%

46,957

4.7

%

Interest expense, financing costs, and other

22,568

2.0

%

13,574

1.4

%

Income before provision for income taxes

26,528

2.3

%

33,383

3.3

%

Provision for (benefit from) income taxes

(41,068

)

(3.7

%)

12,953

1.3

%

Net income

$

67,596

6.0

%

$

20,430

2.0

%

Weighted-average common stock outstanding:

Basic

67,825,430

59,943,264

Diluted

69,244,678

60,993,080

Net income per share:

Basic

$

1.00

$

0.34

Diluted

$

0.98

$

0.33

1

The first quarter 2018 operating results include $5.6 million
($4.0 million, net of taxes) of non-recurring charges, $18.2
million ($12.9 million, net of taxes) of amortization for acquired
intangibles, and $12.3 million ($8.7 million, net of taxes) of
interest expense, financing costs, and other for the recognition
of certain costs related to acquisitions. The first quarter 2018
also includes a $46.5 million net non-recurring tax benefit. See
“Adjusted Net Income (Loss) and Adjusted EPS” table for further
details.

2

The first quarter 2017 operating results include $1.2 million
($0.7 million, net of taxes) of non-recurring charges, $20.1
million ($12.3 million, net of taxes) of amortization for acquired
intangibles, and $1.6 million ($1.0 million, net of taxes) of
interest expense, financing costs, and other for the recognition
of certain costs related to acquisitions. See “Adjusted Net Income
(Loss) and Adjusted EPS” table for further details.

BEACON ROOFING SUPPLY, INC.

Consolidated Balance Sheets

(In thousands)

December 31,

September 30,

December 31,

2017

2017

2016

Assets

Current assets

Cash and cash equivalents

$

63,827

$

138,250

$

73,271

Restricted cash

1,300,000

-

-

Accounts receivable, net

552,703

704,527

489,898

Inventories

603,793

551,924

528,709

Prepaid expenses and other current assets

218,718

209,138

209,651

Total current assets

2,739,041

1,603,839

1,301,529

Property and equipment, net

154,687

156,129

147,340

Goodwill

1,251,825

1,251,986

1,197,550

Intangibles, net

410,857

429,069

444,210

Other assets, net

8,868

8,534

1,511

Total Assets

$

4,565,278

$

3,449,557

$

3,092,140

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

315,442

$

503,697

$

336,837

Accrued expenses

266,049

261,297

166,479

Current portion of long-term obligations

14,239

14,141

14,610

Total current liabilities

595,730

779,135

517,926

Borrowings under revolving lines of credit, net

-

3,205

332,679

Long-term debt, net

2,000,059

721,268

722,516

Deferred income taxes, net

93,451

138,383

136,260

Long-term obligations under equipment financing and other, net

23,694

25,760

32,915

Total liabilities

2,712,934

1,667,751

1,742,296

Commitments and contingencies

Stockholders' equity:

Common stock

679

677

600

Undesignated preferred stock

-

-

-

Additional paid-in capital

1,050,389

1,047,506

701,542

Retained earnings

815,782

748,186

667,752

Accumulated other comprehensive loss

(14,506

)

(14,563

)

(20,050

)

Total stockholders' equity

1,852,344

1,781,806

1,349,844

Total Liabilities and Stockholders' Equity

$

4,565,278

$

3,449,557

$

3,092,140

BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Cash Flows

(In thousands)

Three Months Ended December 31,

2017

2016

Operating activities:

Net income

$

67,596

$

20,430

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

26,904

28,425

Stock-based compensation

3,459

3,816

Certain interest expense and other financing costs

707

1,418

Gain on sale of fixed assets

(319

)

(312

)

Deferred income taxes

(44,923

)

788

Changes in operating assets and liabilities, net of the effects of
businesses acquired:

Excludes acquired branches that have not been under ownership for
at least four fiscal quarters prior to the start of fiscal year
2018.

2

There were 61 business days in each of the quarters ended December
31, 2017 and 2016.

BEACON ROOFING SUPPLY, INC.

Adjusted Net Income (Loss) and Adjusted EPS1

(In thousands, except per share amounts)

Three Months Ended December 31,

2017

2016

Amount

Per Share

Amount

Per Share

Net income

$

67,596

$

0.98

$

20,430

$

0.33

Company adjustments:

Acquisition costs2

25,633

0.37

13,970

0.23

Effects of tax reform3

(46,492

)

(0.67

)

-

-

Adjusted Net Income (Loss)

$

46,737

$

0.68

$

34,400

$

0.56

1

Adjusted Net Income (Loss) is defined as net income excluding
non-recurring costs related to acquisitions and the amortization
of intangibles, as well as the non-recurring effects of tax
reform. We believe that Adjusted Net Income (Loss) is an operating
performance metric that is useful to investors because it permits
investors to better understand year-over-year changes in
underlying operating performance. Adjusted net income per share or
"Adjusted EPS" is calculated by dividing the Adjusted Net Income
(Loss) for the period by the weighted-average diluted shares
outstanding for the period (see Consolidated Statements of
Operations for amounts).

2

Acquisition costs for the three months ended December 31, 2017
include $17.8 million of non-recurring charges related to
acquisitions and $18.2 million of amortization expense related to
intangibles, both net of $10.4 million in tax in total.
Acquisition costs for the three months ended December 31, 2016
include $2.7 million of non-recurring charges related to
acquisitions and $20.1 million of amortization expense related to
intangibles, both net of $8.9 million in tax in total.

3

The non-recurring impact of deferred tax asset revaluation and a
recognized provisional expense related to the repatriation of
earnings and profits of our foreign subsidiary, Beacon Roofing
Supply Canada Company.

While we believe Adjusted Net Income (Loss) and Adjusted EPS
are useful measures for investors, these are not measurements
presented in accordance with United States Generally Accepted
Accounting Principles (“GAAP”). You should not consider Adjusted
Net Income (Loss) or Adjusted EPS in isolation or as a substitute
for net income and net income per share or diluted earnings per
share calculated in accordance with GAAP.

BEACON ROOFING SUPPLY, INC.

Adjusted EBITDA1

(In thousands)

Three Months Ended December 31,

2017

2016

Net income

$

67,596

$

20,430

Acquisition costs2

5,569

1,160

Interest expense, net

23,516

13,239

Income taxes

(41,068

)

12,953

Depreciation and amortization

26,904

28,425

Stock-based compensation

3,459

3,816

Adjusted EBITDA

$

85,976

$

80,023

Adjusted EBITDA as a % of net sales

7.7%

8.0%

1

Adjusted EBITDA is defined as net income plus interest expense
(net of interest income), income taxes, depreciation and
amortization, stock-based compensation, and non-recurring
acquisition costs. EBITDA is a measure commonly used in the
distribution industry, and we present Adjusted EBITDA to enhance
your understanding of our operating performance. Adjusted EBITDA
is used in our bank covenants and we use Adjusted EBITDA as an
internal performance measurement and as one criterion for
evaluating our performance relative to that of our peers. We
believe that Adjusted EBITDA is an operating performance measure
that provides investors and analysts with a measure of operating
results unaffected by differences in capital structures, capital
investment cycles, and ages of related assets among otherwise
comparable companies. Further, we believe that Adjusted EBITDA is
a useful measure because it improves comparability of results of
operations, since purchase accounting used for acquisitions can
render depreciation and amortization non-comparable between
periods. We use these supplemental measures to evaluate
performance period over period and to analyze the underlying
trends in our business and establish operational goals and
forecasts that are used in allocating resources. We expect to
compute Adjusted EBITDA using the same consistent method from
quarter-to-quarter and year-to-year.

2

Acquisition costs reflect all non-recurring charges related to
acquisitions (excluding the impact of tax) that are not embedded
in other balances of the table. Certain portions of the total
acquisition costs incurred are included in interest expense,
income taxes, depreciation and amortization, and stock-based
compensation.

While we believe Adjusted EBITDA is a useful measure for
investors, it is not a measurement presented in accordance with
GAAP. You should not consider Adjusted EBITDA in isolation or as a
substitute for net income, cash flows from operations, or any
other items calculated in accordance with GAAP. In addition,
Adjusted EBITDA has inherent material limitations as a performance
measure. It does not include interest expense. Because we have
borrowed money, interest expense is a necessary element of our
costs. In addition, Adjusted EBITDA does not include depreciation
and amortization expense. Because we have capital and intangible
assets, depreciation and amortization expense is a necessary
element of our costs. Adjusted EBITDA also does not include
stock-based compensation, which is a necessary element of our
costs since we make stock awards to key members of management as
an important incentive to maximize overall company performance and
as a benefit. Moreover, Adjusted EBITDA does not include taxes,
and payment of taxes is a necessary element of our operations.
Accordingly, since Adjusted EBITDA excludes these items, it has
material limitations as a performance measure. We separately
monitor capital expenditures, which impact depreciation expense,
as well as amortization expense, interest expense, stock-based
compensation expense, and income tax expense. Because not all
companies use identical calculations, our presentation of Adjusted
EBITDA may not be comparable to other similarly titled measures of
other companies.